Dangdang and JD.com: A Company’s Greatest Risk Is Refusing to Take Risks

A CEO’s Courage In 2004 or 2005, if investors had been offered a choice between Dangdang and JD.com, most would have chosen Dangdang. On the team’s education and experience, the website’s revenue and profits, and its various performance measures, Dangdang looked stronger. Dangdang was founded in 1999. In 2004, it received US$11 million from the American Tiger fund; other shareholders included IDG and SoftBank China. It listed on the NYSE in December 2010, becoming the first Chinese B2C company listed in the United States. (This was also part of the ‘Copy to China’ trend of the time: Amazon was founded in 1994 and listed in 1997.) JD.com was not founded until 2004. Dangdang began by selling books, while JD.com focused on computers, communications products, and consumer electronics. Although JD.com started a few years later, it still caught the e-commerce wave. Dangdang became profitable very early, but slowed new investment after doing so. JD.com, by contrast, kept expanding aggressively under Richard Liu’s direction. It invested relentlessly, reinvesting everything it earned, and even ran into working-capital problems several times because it expanded too quickly. Investing in JD.com and Richard Liu involved substantial risk. A company’s greatest risk is refusing to take any risk. Companies unwilling to take risks should also prepare to be replaced. By now, Dangdang’s US$530 million market capitalization when it went private and delisted in the United States in 2016—only one-fifth of its value at its NYSE listing—stands in contrast to a gap of more than a hundredfold between Dangdang and JD.com. #A company’s scale depends on its CEO’s vision and courage